U.S. Warns China on Semiconductor Rebates

The United States is prepared to take legal action against China if it does not change tax policies that are blocking sales of U.S. semiconductors in the Chinese market, a U.S. official said.

Deputy Assistant U.S. Trade Representative Charles Freeman said the Bush administration was “actively preparing a case” to take to the World Trade Organization if the U.S. could not work out a solution with China in the next few months.

The case would be the first the U.S. has brought against China since Beijing’s entry into the WTO in December 2001. U.S. semiconductor companies complain that China’s practice of rebating more than 80% of its value-added tax on semiconductors to domestic firms hurts foreign suppliers.